Rates focus in review of stadium

The Dunedin City Council's review of the Forsyth Barr Stadium
operating model will have to grapple with the potential to
fuel a money-go-round that could drive up rates across the
city, council staff say.

Councillors considering the Dunedin City Council's draft
budget this week asked staff to reconsider the stadium's
rates bill, as part of a wider review announced by council
chief executive Dr Sue Bidrose.

The move came as the council confirmed the stadium's value
was set to increase on July 1, from $153 million to $164
million, following a recent assessment by Quotable Value.

QV figures would normally be used to calculate the stadium's
rates bill, but councillors in 2010 granted the venue a
subsidy amounting to 93%, reducing its nearly $2 million
annual rates bill to $134,000, later adjusted for inflation.

The discount aimed to avoid ''distorting'' the rating system
for other properties, and meant the council would receive the
same rates as it would have from properties previously
occupying the stadium site.

Cr Lee Vandervis on Monday called for that to be
reconsidered, despite warning it could drive up general
rates, saying more council funding to cover a higher stadium
rates bill would be ''more honest''.

But, with Dunedin Venues Management Ltd already unable to
meet budgets, council financial planner Carolyn Howard said
any increase in the company's rates bill could come back to
ratepayers.

''If we did rate the stadium and we had an increase in its
value like that, then we'd have to look at the funding issue
again, so you'd get that circular problem.

''If the stadium was rated normally, like a normal
non-residential property, and if the stadium needed to pay
that, then they would require more financial assistance from
the council, and that would drive general rates up.''

The issue would be considered as part of the wider stadium
review announced by Dr Bidrose last week, which it was hoped
would be completed by the middle of the year.

Cr Vandervis said when contacted yesterday it was the
stadium's rates discount - not the threat of a full rates
bill - that distorted the rating system.

The discount meant the stadium paid only ''a fraction'' of
its infrastructure costs, including electricity, water and
roading, ''forcing other commercial properties and businesses
to pay for those services''.

''It would be more honest for the stadium to pay its rates
and claim them as an operating expense like every other
Dunedin business enterprise. Then the public would have a
better idea of how much greater Dunedin ratepayer bail-outs
of the stadium are.''

''That would be the impact. That's why we changed it in the
way in which we did.''

The QV figures also showed the stadium's value had increased
by 7.2%, above the city-wide increase in property values,
which stood at 3.6%.

QV staff said yesterday the increase in the stadium's value
reflected the rising cost of construction, minus
depreciation, ''but the costs are going up faster than the
depreciation''.

Ms Howard said the QV valuation was separate from work by
Darroch Valuations, in 2011, which put the venue's value at
$225 million, and an earlier council report, which discussed
a value of between $175 million and $200 million.

A review by PricewaterhouseCoopers put the stadium's
construction cost at $224.4 million in 2012, while the
council last year said the cost could be as high as $266
million, if a list of $42 million in stadium-related extras
was included.

Ms Howard said the work by Darroch Valuations had been used
to calculate DVML's annual $4 million rent requirement - paid
to Dunedin Venues Ltd to help service borrowing costs - but
QV figures were used for rateable values.

Councillors on Monday also voted in favour of a CPI
adjustment of the stadium's rates bill, amounting to a 1.4%
increase for 2014-15.

That would lift the stadium's rates bill by almost $2000,
from $135,600 - excluding GST - to $137,500.

So you're trying to tell us that as the stadium was rushed
through along with the job of finishing the road before the
WRC (to ensure they could keep the grant from Govermnet) this
has nothing to do with the stadium?

The two are inextricably linked.

Had the DCC taken the appropriate time to ensure that all
legal processes were followed they wouldn't be in this mess
with Mr Hall, which is a further waste of our money.

But they couldn't take the nesessary time, the job HAD to be
done regardless. I put it to the DCC that they knew they were
flouting with due process but had no option as there was a
deadline. Get it done and deal with the consequences later...

That money is not the fault of the stadium but the fault of
the council that tried to cut corners and didn't follow
proper proceedure.
The statement "DCC's unlawful actions in having the highway
developed in the begining"is completely false. As I said,
this project had been planned years before the stadium -, in
fact I remember it was being dicussed not long after I moved
here in 1993.
The development by the DCC and NZTA of the realignment was
perfectly legal - it was the notification and designation
processes once it was decided to bring it forward here the
DCC ignored their own legal processes.
Even the fact that it was brought forward to align with the
stadium build was good - it should have saved the council
money in at least 2 ways:
1: The work was concurrent and shouldn't incurred some of the
additional cost seperate projects do.
2: The NZTA took over the ongoing costs of the piece of road
from the DCC earlier than they otherwise would have.
The subsquent mess with Mr Hall (who I support) is not the
stadium's fault but the council's - if it had done its job
correctly it wouldn't be in this mess.

Lets not dismiss the hundreds of thousands of our dollars
being poured down the drain regarding the DCC's unlawful
actions in having the highway developed in the begining. This
is what happens when you rush through an ill-conceived plan.

Legal fees from both the DCC and having to pay Mr Hall's
legal bill are still mounting.

They have to redo the consent process which may include
substantial road works to rectify that awfull botched piece
of road.

MikeSTK says "roads to service it (including new roading
built just for it)"

Those road works were already on the books to be done and
were not done just for the stadium. They had been fought for
long before they had even thought of the stadium. They were
simply brought forward and in fact saved us some money as the
NZTA picked up the majority of the cost and took over
resposibility for that section of road earlier. I supply
this extract for you:

State Highway 88

Approximately 1.1 km of State Highway 88 (SH88) was realigned
around the back of the Stadium in time for the Rugby World
Cup in 2011.

The realignment of this section of State Highway 88 had
already been proposed, but was brought forward to run
alongside the Stadium project. The New Zealand Transport
Agency (NZTA) contributed about $16 million of the project
costs, which at June 2013 were $26.6 million. When the
project is complete, the NZTA will take responsibility for
that section of highway and the only ongoing costs to the DCC
will be debt servicing.

As well as its share of the project costs, the DCC has
one-off operational costs of $104,000 relating to the highway
realignment.

The Wickliffe Street walkway, which is due to be installed in
2013/14, is part of the State Highway 88 project. It is
budgeted to cost $447,000.

Sorry, upon further research and re-reading I see I was
wrong, I had thought they had reduced the value of the
property for rating purposes (to the total value of the
original properties), When in fact it is the rates themselves
they have fiddled with.

This being known I agree that while having no effect on other
rates whichever way they did it, it would be more honest to
increase the subsidies to the stadium than charge it full
rates.

Lynden, re your point that charging unsubsidised rates
for the stadium would "unfairly raise the rates the
surrounding businesses would have to pay as the value of a
given building isn't just the building and the land but the
area it is in." Rates are charged on the valuation, not
on whether the rates are actually paid by the owner or, as in
the case of the Fubar Stadium, by the ratepayer via the DCC
subsidy. The valuation does not change according to who
pays. If you paid my rates for me (I wish!) it would
not alter the valuation of my property, therefore would have
no effect on my neighbours' valuations and rates bills.

Jimmy: yes I think Lynden betrays a fundamental
ignorance of how rates are struck - what the city does is
decide to collect a fix number of dollars from ratepayers
each year - then they add up the valuations of all the
properties in the city and rate each property at it's
proportion of this sum, times the amount of money the city
wants to raise.

If the amount that the rugby stadium is rated at is returned
to a normal rate (ie the portion of its valuation that's used
to calculate the above sum) it won't change the valuations of
the properties around it (the city didn't change the rugby
stadium's valuation by reducing its rates, if anything they
probably raised it, it only included 7% of its value in the
sum). What would change would be that the proportion of that
total city valuation the stadium represented, its proportion
would go up and everyone else's proportion would go down, the
rugby stadium's rates would rise to become normal and
everyone else's would go down by the same number of dollars.

Of course that would leave DVML with more of a shortfall,
because of the ratepayer subsidy that the lowered rates
represent - the stadium after all is a big user of city
water, roads to service it (including new roading built just
for it), street lights in and around it, councilors to debate
it, etc etc there's no real reason it should get this special
treatment, the bogus rugby stadium rates are just a way to
quietly hide some of the real costs of the rugby stadium to
the city, and to quietly foist them on the ratepayers without
creating a line item in any DCC budget document.

Lynden: You
believe that if DVML was charged full rates, then the nearby
businesses would have to pay more rates as a consequence. You
say that this would happen because charging DVML
un-subsidised rates would increase the value of the land of
the properties in the area. I don't see why the land value
would increase, so I will stick with what I said below - that
charging DVML full rates instead of the 93% subsidised
rates would make no difference to ratepayers. See
below for details. The thing
that would make a big difference to ratepayers would be not
having to pay the $20 million of annual stadium losses and
costs. This amounts to about $264 of extra rates per year for
the average house owner, and heaps more for farmers and
businesses. I want my money back.

It seems to me that the mistake that you have made (along
with Cr Richard Thomson and the ODT) is to believe the DCC
CEO and her staff. Inb my opinion their motivation is to
create the appearance that DVML is slightly less of a
financial basket-case than it actually is. It makes the books
look $2 million better.

I think the point of the rates reduction and the legislation
it was done under is that to they charged for the full value
of the stadium it would unfairly raise the rates the
surrounding businesses would have to pay as the value of a
given building isn't just the building and the land but the
area it is in , so to avoid unreasonable rate increases to
surrounding businesses.

There are precedents for this.

I'm sure those surrounding businesses would all like to thank
you all if the stadium has to pay the full rates.

Hype.O.Thermia
is exactly right when they say that: "The current subsidy
is nothing more than a way to disguise how much it's leaning
on the rest of us." By not charging DVML rates, extra
rates are charged to the rest of us. Not charging them rates
is a deception, because it is not obvious that the extra $2
million of rates that we pay is actually another stadium
subsidy. In my view the purpose of not charging the stadium
rates is to create another hidden stadium subsidy.

Cr Richard Thomson is wrong to accept the word of council
staff without thinking: he is wrong to say that charging the
stadium full rates would "leave the average ratepayer
paying more". He seems to forget that ratepayers are
already paying more because of the hidden subsidy (described
above). Now if DVML was required to pay full rates, then it
would make no financial difference to ratepayers. It would
make no difference because the DCC would be paying DVML an
extra $2 million subsidy, and DVML would be paying the same
amount back to the DCC as rates. There is therefore no net
financial difference to ratepayers, DCC nor DVML. In my
opinion Cr Thomson and the DCC Financial Planner are both
wrong.

Charging DVML full rates has no financial benefit or
detriment, however the advantage of doing this is that it
more honestly shows the financial situation. Stadium
financial information is severely lacking in transparency and
this would be one small step in the right direction.

I don't get it. If the Fubar Stadium were billed for
the rates it ought to pay, but then couldn't pay so had to be
bailed out by other peoples rates, how would this be
different from now? The current subsidy is nothing more
than a way to disguise how much it's leaning on the rest of
us. It would have to borrow, like I would if I couldn't
pay my rates. The difference is that my chance of
getting the DCC to lend me the money are approximately zero,
so I personally would be getting deeper and deeper in debt,
and those grownups who are not completely financially
illiterate know what the consequences of that would be for
me.

I'm sorry, but every time I read yet another explanation of
the logic employed by the council's finance team, that
classic by Sir Walter Scott springs to mind. "Oh what a
tangled web we weave, when first we practise to
deceive!"

Why is the tenant not paying/meeting the full cost for the
rates bill, as in all other rental agreements I have signed
or looked at in regards to renting a warehouse etc?
Ratepayers should not have to meet this cost.
I wonder if I should asked Dave to consider getting the
ratepayers of Dunedin to cover my business cost (rates and
possibly part or all of my rent). And while I'm at it, I
wonder if the good people of Dunedin would think about
covering the rates for my home as well? This would enable to
spend more money elsewhere in the city, maybe at the bars or
fast food places. And help to give me a better life
style.

I say we should make the tenant cover the full cost of this
ugly pile of concrete and grass, or close it down - just as I
would have to do if my business was losing me large sums of
money every year and I required the bank to bale me out. How
long would the bank keep lending me money to prop up a dying
business?
How long is it going to be before we get intelligent people
at the head of our city who understand that sometimes it is
best to close down and get out while you still have one set
of clean underwear left?

Let's have a show of hands who would like to see this stopped
now before it get any worse. My hand is up. Close it down
now, or risk me refusing to pay my rates. There should not be
one law for you and another for the rest.